Proposal 15-1: Where will the money go?

Taxes paid at the pump will go to fund transportation projects.

The complex road funding package known as Proposal 15-1 has received much media attention. It is, after all, asking voters to approve a sales tax increase, from six percent to 7 percent, and enshrine in the state constitution a change in how motor fuel is taxed. Passage of Proposal 1 also would trigger other laws affecting funding of public education and local units of government. (See a recent Michigan State University Extension article, May 5 ballot proposal on transportation funding, which explains the proposal in more depth).

During presentations on Proposal 15-1, the question most frequently asked is, “Will the money raised by a tax increase really go to roads?

The short answer is both yes and no.

Yes: in changing how motor fuel is taxed, all taxes paid at the pump would go to the Michigan Transportation Fund (MTF). Under the state constitution, 90 percent of the MTF must be used for administrating, constructing, maintaining and repairing local and state roads and bridges. The remaining 10 percent of the MTF is used to supplement public transit programs, such as local bus services, passenger and freight railways and harbor dredging. In short, it would be unconstitutional for taxes paid on motor fuels to go to anything but transportation.

And no: This is where it gets complicated. Exempting motor fuels from the sales tax means that local governments, public education, and the state’s General Fund would lose revenue they currently receive from the sales tax on fuel. To make up losses to these entities, Proposal 15-1 includes a proposed sales tax hike, from 6 percent to 7 percent. Therefore, revenue from the proposed increase in the state sales tax would be directed to local governments, public education, and the state’s general fund—and not to roads.

MSU Extension has written a detailed summary of Proposal 15-1 to assist citizens in better understanding all the complexities of this ballot proposal. To read or download a copy of this white paper, see MSU Extension’s bulletin on Proposal 15-1.

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